Auditors are key players in ensuring the integrity and transparency of various organizations’ financial reporting. Being a professional, they check whether financial statements are accurate and reliable to ensure that companies operate under the set regulatory standards and best practices. Scrutinizing financial records helps auditors develop valuable insights for making decisions by stakeholders such as investors and regulators. The increase in complexity in global financial systems and a demand for accountability makes the role of an auditor increasingly crucial for securing trust and stability in business. This article delves into the role and responsibilities of the auditors under the Companies Act, 2013.
The appointment of an auditor is mentioned under Section 139 of the Companies Act, 2013, which mandates that every company must appoint an auditor at its first Annual General Meeting (AGM). The auditor typically holds office from the end of that meeting till the end of the sixth Annual General meeting. The powers and duties of an auditor are stated under Section 143 of the Companies Act, 2013.
Powers and duties of the Auditor
Section 143(1): This provision states that the auditor has the power to audit the books of accounts and relevant records to the extent mentioned in the act.
Section 143(2): The auditor must report to the company and shareholders in writing about the financial statements and books of accounts, providing a genuine perspective of the company’s affairs.
Section 143(3): The auditor has to create an opinion that should be included in the report regarding whether the books of account are created based on the standards set by the law, whether the financial statements are as per the accounting standards, whether the company has sufficient internal financial controls system and the efficiency of such controls.
Section 143(4): The auditor proceeds to give any negative notes about the audit, he shall state the opinions with proper reasons.
Section 143(5): In the case of a Government Company, the auditor shall be appointed by the Comptroller and Auditor-General of India under Section 139(5) or under Section 139(7) and direct the auditors on the manner in which the audit can be conducted. Further, the auditor shall submit the report to the Comptroller and Auditor-General of India.
Section 143(9): Every Auditor is required to comply with the Auditing Standards.
Section 143(10): The Auditing Standards are prescribed by the Central Government along with the recommendations of the Institute of Chartered Accountants of India, in consultation with the examination of the recommendations stated by the National Financial Reporting Authority.
Section 143(14): The provisions of this section with necessary changes made shall apply to the cost accountant in practice conducting cost audit under Section 148 or the company secretary in practising conducting Secretarial audit under Section 204.
AUTHOR:
Saraswathy Thogainathan, 5th year BBA. LL.B (Hons.), Saveetha School of Law, Chennai